• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Intel Revenue Falls on Missed PC Sales Expectations

Posted on: Thursday, 20 April 2006, 06:00 CDT

By Michelle Kessler

SAN FRANCISCO -- Semiconductor giant Intel on Wednesday blamed sluggish PC sales for a 5% drop in its quarterly revenue from a year ago.

The world's No.1 chipmaker said that its customers -- mainly PC makers such as Dell and Hewlett-Packard -- were too optimistic when buying chips last year. When sales didn't keep up, they were stuck with too much inventory.

That caused new sales of Intel's signature product, computer processors, to fall. Intel was forced to write off some products and lower prices on others.

As a result, revenue dropped to $8.9 billion from $9.4 billion a year ago.

"Although the computing market segment remains healthy overall, PC growth rates have moderated somewhat," CEO Paul Otellini said.

Otellini doesn't expect things to get better in the current quarter, which is traditionally a slow one for computer sales. He's predicting revenue from $8.0 billion to $8.6 billion.

Intel also lowered its full-year estimate to $38.8 billion, which would be a 3% drop from 2005.

Doug Freedman, an equity analyst with American Technology Research, worries that the estimate may not be low enough. "They'll need a pretty strong (second) half to meet it," he said.

But equity analyst Ashok Kumar with Raymond James says things may improve. "We're not seeing a situation where demand is falling off the cliff," he says.

One reason for the buildup: Delays in Microsoft's release of the next version of its Windows operating system, Kumar says. The software, called Vista, is to be released to most businesses in November and consumers in January. Many PC buyers may be postponing purchases until then, he says.

That's little comfort to Intel now. The company's net income of $1.3 billion, or 23 cents a share, fell from $2.2 billion, or 35 cents a share, a year ago.

In response, Intel plans to trim spending. "We are undertaking a comprehensive analysis of our company with a goal of increasing our overall efficiency," Otellini said.

The news, released after market close, sent Intel shares up 1% to $19.77 in after-hours trading. (Intel on March 3 had warned investors to expect lower earnings. At the time, Intel shares traded at $20.48.)

Another worry for Intel is rival Advanced Micro Devices. AMD reported a 9% jump in its first-quarter earnings and said it gained share from Intel.

(c) Copyright 2005 USA TODAY, a division of Gannett Co. Inc.

Source: USA TODAY

More News in this Category